By Andrew Lambe. 4th February 2013 (Updated 8th January 2016)
When registering a new company, the difference between the Authorised Share Capital (ASC) and the Issued Share Capital (ISC) is something that can be quite confusing especially when setting up a company for the first time. Most company formation agents and accountants use a standard Authorised Share Capital of €100,000 or €1,000,000 and this can scare people into thinking that they might be potentially liable for this amount. Fortunately, this is not the case!
Authorised Share Capital
The authorised share capital (or nominal share capital) can best be described as the maximum amount of share capital that the company is authorised by its Constitution / Memorandum & Articles of Association to issue (allocate) to shareholders. Part of the authorised share capital can (and usually does) remain unissued. It is important to note that this figure is a nominal amount and therefore does not have to pay, nor is there any liability for this amount.
At Company Bureau we recommend that you make your Authorised Share Capital €100,000 divided into 100,000 shares of €1 each, or €1,000,000 divided into 1,000,000 shares of €1 each if you are looking at securing investment in the future. A high ASC may save you from increasing this in the future due to possible investment or inflation. There is no downside to having a high Authorised Share Capital but there can be a downside to having a low Authorised Share Capital if it turns out that you need to increase same!
Issued Share Capital
The Issued Share Capital is the total of the share capital issued (allocated) to shareholders. Under Irish company law, the issued share capital does not have to be paid up unlike most European countries, however, the shareholder’s liability is limited to the amount that remains unpaid on the shares. This concept forms the basis of a limited liability company in Ireland.
At Company Bureau we recommend that you have your Issued Share Capital low to begin with, as this is the amount you are actually liable for. We recommend an Issued Share Capital of €100 divided into 100 shares of €1 each. If you prefer to issue more than 100 shares at the outset, you could consider making the ‘par value’ of the shares 1 cent instead of 1 euro. Having one cent shares means you could have 10,000 shares issued on incorporation, but still have the ISC at just €100 in monetary terms. You can even have the par value of the shares as low as €0.0001 if you wish.
Under the new Companies Act 2014 which was commenced on the 1st of June 2015, a Private Company Limited by Shares (LTD) is not obliged to have an authorised share capital but must have an issued share capital. All other company forms must have both an authorised and issued share capital.
You may also be interested in the various Types of Share Classes for Irish Companies.
For more information on registering a company in Ireland, structuring the optimum share capital for your new company, and ensuring you get your new business off to the best possible start; please don’t hesitate to contact the experts in Company Bureau on +353 1 6461625 or alternatively you can fill out an enquiry form here.